Banks Shed Internal Alternative Managers, Chance for Sovereign Funds
The infamous Volcker rule, a Dodd-Frank Act provision, is being finalized – U.S. banks are being proactive and shedding assets. The rule prohibits banks from investing in any funds they do not manage. In addition, banks cannot invest more than 3% of their tier-1 capital in private equity or hedge funds.
As U.S. financial conglomerates continue to shed alternative asset managers like private equity and hedge funds, the asset management industry is ready to gobble them up with open arms. Just in August, Citigroup unloaded more than US$ 6 billion in hedge fund and private equity assets. Citi Venture Capital International, a private equity vehicle focused on emerging markets, was sold to The Rohatyn Group, a private equity fund managed by Nicolas Rohatyn. The Rohatyn Group manages around US$ 7 billion in assets. Remaining is Metalmark Capital, a private equity fund focused on North America, in which Citi is trying to negotiate a sale with fund management.
Sovereign wealth funds and public pensions could also be buyers of these asset management firms.
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